Summer 2005 Conducting a Great Performance Review

The performance review: an ordeal that’s loathed, feared and often rescheduled until it can’t be put off any longer. So common is the tendency to disparage the traditional employee evaluation that you have to wonder if it’s worth the effort. Why not drop the whole thing?

Successful employers, of course, have come to grips with such emotional reactions and recognize the performance review for what it is: The best tool for creating a motivated workforce that boosts the bottom line.

“Having a performance appraisal system is the most important step any organization can take, regardless of its size,” says Dick Grote, a performance management consultant. “Every single person in every single company wants to know the answers to two questions: First, What is it you expect of me? Second, How am I doing at meeting your expectations? Performance appraisal is the one system we have that gives people the answers to both questions.”

If you don’t have a good performance-appraisal system, you end up with employees working in the dark, thinking they’re doing the right thing simply because no one tells them anything different, says Grote. Fact is, people need continuing guidance to improve. “Too often managers don’t say anything unless they catch someone doing something wrong.” So how can you conduct a great performance review? Here’s how.

Review through the year

Too often, performance evaluations are lumped together into a single high-stress meeting at the end of the year. Not good. Effective evaluation is a continuing process, say workplace consultants. Successful leaders work closely with employees through the year to set expectations, evaluate progress and re-adjust performance.

Regular reviews prevent an otherwise common disaster: unpleasant surprises at evaluation time. Suppose you make a big deal of an employee’s poor performance in the annual appraisal meeting. That employee—target of your criticism is likely to come back with a logical “Why didn’t you tell me this sooner?”

Good question, says Grote: “People want to do a good job. It’s the responsibility of the managers to let them know how to do it.” That means communicating expectations at the beginning of the year, and giving feedback regularly. How often? It depends on the individual and the role they’re in, says Grote. It also depends on how long the person has been in the job. You might review a seasoned employee’s performance three or four times a year; for a new employee, a chat once a week for the first month or two is a better approach.

The best system has no predictable dates for reviews, says Don Schackne, president of Personnel Management and Administration Associates. “Employees maintain a high level of productivity if they don’t know when their supervisors will say ‘We’re going to sit down this afternoon for a performance review.’”

Conversely, a formal schedule for annual or semi-annual reviews can create what Schackne calls a performance halo effect. “As you approach the review date, the [so-so] employee begins to perform better. Then the review takes place and now the employee sits back and performance slides again,” he says. That’s bad for everyone.

Quantify performance

Let’s say John’s performance has been deteriorating over the past few months. How do you know? And how can you communicate that to John in a convincing way?

Daniel P. Moynihan, principal at Compensation Resources, a performance and evaluation training firm, boils it down to this: “Keep records on employee actions and results; then base performance ratings on those records rather than on subjective feelings.”

Here’s the reason: Numbers can make a difference in communicating your concerns to under—performers. Suppose you’ve received complaints from customers about an employee. You’ll only cause that employee to balk if you say, “You need to improve your customer relations skills.” Instead, say, “We received six complaints from customers about you during the past year.” Then read the details of each complaint from written records, and go from there.

Other examples of using numbers: How many times did an employee arrive late for work, and by how many minutes? How many arguments was an employee involved in on the job? By what percentage or dollar amount did an employee miss established goals?

This approach calls for careful record-keeping, and Moynihan suggests putting notes on paper rather than trusting your memory. “Keep a notebook in your desk,” he says, dedicating one or several pages per employee. “Write down the good and bad things that occur throughout the year,” and discuss them with the employee soon after they occur. During evaluations, refer to your notebook as evidence to convince employees of your desire to be fair, and that your assessments are based on recorded performance.

Failing to tie evaluations to provable events at work can cause “performance creep.” Moynihan explains how it works: “Suppose an evaluation form calls for ratings from 1 to 5 on an escalating scale of performance. The first year the supervisor says, ‘I think you met my expectations, so I’m giving you a 3.’ The next year the supervisor says, ‘You did better this year and I don’t want to give you a 3 again, so I’ll give you a 4.’ Over time everyone’s ratings skew toward the ‘outstanding’ end of the scale.” As collective evaluations rise over time, the reviews become useless in assessing and improving performance.

Performance creep can also result from a fear of confrontation on the part of supervisors who may be uncomfortable with the whole review process. Sometimes if the supervisor assigns a 3, the employee will claim they deserve a 4, and the supervisor backs down and raises the rating.

Of course, none of this is to say that personal characteristics can’t be assessed. You can rate traits such as leadership, initiative, cooperation, interpersonal skills and maturity. Again, your notebook is invaluable for examples as well as numbers.

What about employees whose work can’t be measured, other than for punctuality and the like? For example, a stock-room person. If you can’t come up with good measurable objectives, then take the three or four main components of the person’s job description and evaluate the employee’s actual performance of those components.

Identify causes of poor performance

So John isn’t working well, but why? The causes of poor performance can be difficult to identify. Sometimes people are in the wrong role; or outside problems impinge on their work; or there’s a manager-employee personality conflict. Try asking the employee what he thinks is one of the key reasons for his poor performance. Since most people tend to shift blame away from themselves, you need to get a discussion going. Try asking, “What can we do to improve the work environment to help you perform well?”

These conversations can be difficult because they often touch on issues of personality and style. So it’s important to encourage the employee to open up and contribute. “Make the review a two-way conversation,” says Schackne. “Maybe you say ‘Here’s how I see your performance,’ and then the employee can come back and say ‘here is what I think.’ Make each of your statements a discussion point rather than a threat.” A good program, he says lets the employee leave saying, “The boss didn’t tear me apart or belittle me.”

Set future goals

It’s not enough to delineate the good and bad points of the review period: you have to set specific goals for the next one. Make a “vital tasks” list that outlines every measurable high-priority task. (See the “Get Smart” sidebar.) Sometimes your verbal prompts will be enough to stimulate the employee toward realizing what needs to be done. But also ask for the employee’s insight: What performance would bring the greatest personal satisfaction six months from now? What talents can be honed?

Then set timetables for improvement to help prevent procrastination. The super or manager, too, needs to follow a schedule—one of the traditional failings of evaluations is lack of management’s follow-up. So mark your calendar, coordinate those follow-up dates with the employee, and meet on those dates to discuss progress.

Bottom line

The performance review doesn’t have to be the dreaded ritual it usually is. As the number-one tool for creating a dynamic workforce and with the right approach, timing and tools, you can use it to help your employees set their own goals, and ensure that they’re invested in the review process. Review their performance on a regular basis… set measurable goals… and go by the numbers. By doing things this way, you ensure that facts, not opinions, are the operating mechanisms that assure fairness for all. You’ll get motivated employees who perform well—and that translates to a more profitable business.